The following table from Thomson Reuters shows the current market cap weighting of each of the 11 sectors of the SP 500.
| EARNINGS | ||||||
| Sector | MCap | 17Q1 | 17Q2 | 17Q3 | 17Q4 | 18Q1 |
|
12.3% | 10.5% | 11.4% | 11.1% | 11.2% | 10.6% |
| Consumer Staples | 9.3% | 8.0% | 8.2% | 8.3% | 7.9% | 7.8% |
| Energy | 6.6% | 3.0% | 3.8% | 4.3% | 4.2% | 4.8% |
| Financials | 14.3% | 18.9% | 18.4% | 18.1% | 17.6% | 17.9% |
| Health Care | 13.9% | 16.6% | 15.9% | 15.4% | 14.6% | 15.9% |
| Industrials | 10.1% | 8.4% | 10.3% | 10.4% | 10.0% | 8.9% |
| Information Technology | 22.1% | 21.7% | 20.0% | 20.3% | 24.5% | 21.8% |
| Materials | 2.8% | 3.1% | 3.2% | 2.5% | 2.4% | 3.1% |
| Real Estate | 2.9% | 2.7% | 2.6% | 2.5% | 2.5% | 2.6% |
| Telecommunication Services | 2.4% | 3.6% | 3.3% | 3.1% | 2.7% | 3.3% |
| Utilities | 3.2% | 3.6% | 2.8% | 4.0% | 2.4% | 3.4% |
| Source: Thomson Reuters I/B/E/S | ||||||
(One caveat to readers: the non market cap columns for Q1 ’17 – Q1 ’18 are NOT expected growth rates but expected earnings weights for the sector. )
Here is how the sectors rank from strongest to weakest earnings growth in Q1 ’17:
- Financial’s: +15.4%
- Technology: +14.8%
- Basic Materials: +12.3%
- Health Care; +2.7%
- Cons Spls: +2.5%
- Real Estate: +1.6%
- Utilities: +0.9%
- Cons Disc: -1.4%
- Telco: -2.8%
- Industrials: -5.6%
- Energy: +605%
SP 500: +10.1% earnings growth expected in Q1 ’17
If the usual pattern reveals itself again in Q1 ’17, and the analysts have reduced their expected earnings growth expectations too much, investors should see the typical 3% – 4% increase or bump between the “estimated” and actual growth rates for the key benchmark.
Investors / readers / earnings watchers could see a 12% – 14% growth rate when Q1 ’17 is ultimately complete by the end of June ’17.
If the SP 500 has discounted all this expected growth is the key issue.
The first table from Thomson also shows the importance of market cap weight to the benchmark: Tech and Financials alone account for about 40% of the SP 500 market cap.
I listed Energy at the bottom of the 2nd table since – while the percentage growth rates look large, the denominator is small using 2016 comp’s – and Energy’s expected “earnings weight” for Q1 ’17 is just 3%.
The patterns are the patterns. Pay attention when they dont work, but in terms of SP 500 earnings for Q1 ’17 and 2017 as a whole, the earnings story looks very good.
Thanks to David Aurelio at Thomson Reuters I/B/E/S.
Thanks for reading.